Loudoun might have to dip into the county’s general fund to help pay for the extension of Metrorail’s Silver Line into the county, and that possibility raised the eyebrows of at least one supervisor at the Board of Supervisors meeting Wednesday.
Supervisors were considering whether to approve a plan to borrow funds through the county’s Economic Development Authority to cover part of Loudoun’s $273 million share of the capital costs of extending the rail line to Dulles Airport and into Loudoun County. As much as $195 million of those costs, plus deferred interest, could be financed through a low-interest federal credit assistance program for transportation projects.
Under the financing plan, the county would repay that loan mostly using revenue from special real-estate tax districts that were created around the two planned Metro stations.
The board’s discussion revealed some concern regarding the potential use of the general fund on the project, and confusion as to whether Loudoun would be legally obligated to repay the loan.
Supervisor Suzanne M. Volpe (R-
Algonkian) appeared to be surprised to read in the staff report that the general fund could be tapped if revenue from the tax districts proved inadequate to cover the county’s obligations.
“Was or was not the tax district put together so that we would not have to use any money from the general fund to pay for Metro?” Volpe asked staff members.
Ben Mays, the county’s chief financial officer, said that the plan had always been to rely mainly on revenue from the tax districts to cover most of the costs of the project. The original financing plan also called for the use of gas tax funds, along with new general fund revenue from personal property, business and sales taxes associated with growth resulting from the Metrorail extension, he said.
“We’re pretty sure — but we can’t guarantee — [that] all of this growth is going to happen,” Mays said. “But we’re pretty sure there’s going to be substantial growth as a result of rail. Much of the growth is going to generate revenues outside of the real property tax. The only ones we can isolate [in tax districts] are the real property taxes.”
Mays said that a general fund “backstop” would be desirable from a credit standpoint, no matter how the project was financed.
“That is the county’s appropriation promise . . . the county’s promise to include in subsequent years’ budgets sufficient funds to pay the debt,” he said. “So just from a credit point of view, this is part of it.”
Volpe seemed unconvinced.
“I just spent the last four days going over every single one of the work sessions we had,” she said.
“The intent is not to use general fund,” Supervisor Ralph M. Buona (R-Ashburn) said. “The reason for general fund is because when you issue bonds, the buyers, the bond holders, the market does expect that the jurisdiction is going to back those bonds. You have a legal obligation, not just a moral obligation . . . to repay those bonds.”
Mays responded that the county would not be legally obligated to repay the bonds.
“If we were to issue the bonds ourselves, they would probably go off at AAA or AA plus, a very high rating,” he said, adding that these bonds would probably have a somewhat lower credit rating. “This isn’t a legal obligation of the county . . . as it is viewed in the market, because this is just a promise that the county administrator will present the adequate appropriation in the budget, and that would be subject to a future board’s decision,” Mays said.
“But it does express the board’s intent — because you can’t bind a future board — that there will be a funding mechanism for this in the future,” he said.
County Attorney John R. ”Jack” Roberts said that although there was no legal obligation to repay the bonds, there would be a moral obligation.
“You’re making a moral obligation to appropriate,” he said. “You’re not legally bound to appropriate. I think the idea of backing it with the general fund is, it’s a better credit.”
“It is not our primary or even expected way to finance this,” Buona said. “But it will allow us to go out maybe at a little better credit standard because that backstop is there.”
Vice Chairman Shawn M. Williams (R-Broad Run) said that the federal credit assistance program was “good for the tax district, building up the base, keeping the toll road rates very low. I think [it’s] a great resource for us to take advantage of.”
The board approved the financing plan by a vote of 6-1-1-1, with Supervisor Eugene A. Delgaudio (R-Sterling) opposed, Supervisor Geary M. Higgins (R-Catoctin) absent and Volpe abstaining.
The board’s approval in 2012 of Loudoun’s participation in the Silver Line project was controversial, passing by 5 to 4 after a tense, heated debate. Volpe was one of the project’s opponents.
Contacted by e-mail after the meeting, Volpe declined to comment further, saying she had set up a meeting with County Administrator Tim Hemstreet to discuss the matter this week.
Jim Barnes is a freelance writer.